6.1 Causes of the Great Depression

Causes of the

Great Depression

U.S. History: 6.1

Multiple Choice

Which of the following was not a cause of the great depression?

• Bad economic for farmers

• Stock Speculation

• Strong economy

• Over-reliance on credit

Objectives:
Identify how weaknesses in the economy in the 1920s caused
the Great Depression.

Explain why the stock market crashed in 1929 and the crash’s
effect on the economy.

Describe how the Great Depression deepened in the United
States and spread
overseas.

Identify the causes of the Great Depression and discuss how
historians’ differ about
them.

Hook Video

https://www.youtube.com/watch?v=GCQfMWAikyU&t=19s&disable_polymer=true

1. How were the
1920s a
“Republican
decade?”

All of the decade’s
presidents were
Republicans…
1920: Warren G. Harding

1924: Calvin Coolidge

2. Who was
elected
President in
1928?

Hoover

�Republican

Herbert
Hoover easily
won the
election.

2. What did
he believe
in?

Hoover believed in…
❑Hard work & personal

responsibility

❑Competition
❑Voluntary cooperation

between labor &
management

3. What caused

the Great

Depression?

3-1: Bad economic times
for farmers already!
❖ Farmers = ¼ of workforce
❖ Low crop prices led to

debt, rural depression in
mid 1920s

3-2. Large gap between the rich &
the poor.
• Middle class gets less poor,

buys cars.

• 1923-1929: corporate profits

jump 32%; workers wages go up
8%

• 1929: top 1% earns same as

bottom 42% combined.

3-3: Uneven distribution of wealth
o
Economy needs people to spend $.

o
Middle class spends most of its
income.

o
Richest don’t spend as much. Rich
getting richer.

o
Therefore, 1920s economy on weak
foundation

3-4: Over-reliance on credit
▪ 80% of radios, 60% of cars

bought using installment plan.

▪ Many stock purchases made

by buying on margin.

▪ In this way, Americans

accumulated greater debt.

3-5: Speculation on stocks
� Speculation = blind

gambling on stocks.

� Soaring stock values had

rewarded this

for much of
the 1920s.

4. What happened
on October 24, 1929?

❑Stock prices had begun to dip.
❑Investors lost confidence, and

started to sell off – even at a loss.

❑Example: GE stock once valued

at $400 was sold for $283 per
share.

❑This is known as BLACK TUESDAY.

A “jumper”

4. on October 29, 1929?

❖16 million shares were sold.
❖Billions of $ lost.
❖Stock Market collapsed.
❖Many speculators lost

everything on
BLACK THURSDAY.

5. How long did

the Great
Depression last?

A: from 1929 to
1941

5. What began
to fail as a result
of the
depression?

•Many banks failed.
•1930: 1,352 banks fail.
•1931: 2,294
•1933: 4,004
•“fail” means when you go to
withdraw $ from your account, you
get nothing because the bank is out
of business. People lost their entire
savings.

A “run” on a bank

6. What
happened next?

✔To save $, businesses began to lay

off employees or close altogether.

✔Henry Ford laid off 75,000 workers.
✔As a result, people spent less $.
✔Therefore, businesses had to cut

more.

A soup
kitchen

1933: 25% unemployment

6. What made the
depression
worse?

❖ The Hawley-Smoot Tariff of

1930 raised taxes on imports.

❖European countries then raised

tariffs on American-made goods.

❖International trade lessened, which

hurt virtually every country.

7. Who else had
an economic
depression?

oEurope
oGermany stopped paying

reparations.

oBritain & France stopped

paying on U.S. loans.

oTheir countries saw bank

failures & layoffs.